Last week’s Fed and ECB meetings were duds, in my opinion, and pretty much what I expected. That’s why nearly all markets will soon resume their major short- and intermediate-term trends. So don’t expect a quiet August. Lots of opportunities and trending moves are near at hand.
Check out my latest video update for more.
P.S. Quite frankly, you should never let the news dictate your investing or trading. Let the markets themselves tell you what they’re doing … and going to do. To learn how to do that, join with my Real Wealth Report subscribers, where you get hard-hitting analysis based on what the markets are actually telling you. Join now by clicking here.
Good morning! This is Larry Edelson for my Uncommon Wisdom video market update for Monday, August 6.
The past week was certainly loaded with lots of news as we had the Federal Reserve meet last Wednesday and then the European Central Bank (ECB) on Thursday. No real surprises, however; the markets were certainly widely anticipating the meetings.
The Federal Reserve and Mr. Bernanke basically announced what I expected, and what is to be expected, which is that they’re going to maintain their current low interest rate policy and all available options to help the economy, but no decisive action yet.
The main reason for that is the Federal Reserve is now looking toward the ECB to solve the European sovereign-debt crisis.
The ECB on Thursday basically announced that they’re going to get more serious about the European sovereign-debt crisis, but they made no substantial announcements.
Overall, the meetings that the markets were waiting for last week — announcements from the Fed and the ECB — were largely a disappointment. That is in keeping with the overall trends, which remain disinflationary.
So with that, let’s go right to the charts.
Gold: As I’ve noted in my previous writings and my previous videos, gold is coiling up for an important move. It could still move just a little bit higher up to $1,660, $1,680 possibly on a short-covering rally, but the trend remains down.
I still fully expect, although it’s taking longer than I expected, to see gold drop below $1,500, down to the $1,450 level and perhaps even lower in the weeks ahead.
Silver: The silver chart pretty much the same as gold; although, overall silver is weaker largely because it’s an industrial metal and it’s very sensitive to the slowing economies in China, Europe and the United States.
You can see that silver here is just climbing sideways with a slight upward bias, a slight little rally, then it fell back down along this support line here.
I still fully expect lower prices in silver and probably a surprising move — shocking move — to the downside. Having said that, it is still possible for silver to stage a little brief short-covering rally, but overall the trend remains down.
U.S. Dollar Index: The Dollar Index has pulled back to this trend line here. It did briefly penetrate it in anticipation of further quantitative easing by the Fed and the ECB. But right after the meetings, the dollar started to rally again.
We’re probably going to see the dollar go a little bit sideways here and then move to a new high. The trend remains up in the short and intermediate term for the dollar.
The Dow Jones Industrials: The Dow Jones Industrials paused before the meetings last week and again here it’s holding support. But cyclically and technically I’m still expecting a move down in the Dow.
We’re getting very toppy in this area here, so please be aware that there are some surprising moves coming up in the markets. I expect them to resolve themselves and pick up momentum no later than the second week of August.
So we’re here now and you should see some trending moves start to develop out of these largely sideways, coiling markets over the last few weeks. Those trends will most likely be to the downside for almost all commodities and just about everything including stocks with the exception being the dollar.
That’s it for now. Stay tuned to my writings. I think the remainder of August and heading into September are going to be quite volatile and quite lucrative, though not without risk.
But the second half of this year actually heading right into the elections should be quite interesting markets, with lots of opportunities!